Messy reality beats philosophy

Catching up on my listening as well as my reading included enjoying the Xmas time edition of Development Drums that was an interview with Angus Deaton in the wake of his recent book the Great Escape that, amongst other things, severely criticises international development aid. I would recommend a listen to the whole thing*, but here is a grossly simplified summary of the key exchanges (which start from about 40mins in):-

Deaton: Aid should be spent for the benefit of poor people, but not in poor countries, as, in the long run at least, aid spent there will always undermine the social contract (we elect you and pay our taxes, we expect half-decent leadership in return).

Barder: What about Anti-RetroViral drugs (ARVs) used to fight AIDS? Surely that is a massive improvement to millions of poor peoples’ wellbeing that was achieved through aid?

Deaton: Well, yes, so I would allow that kind of an exception, but I would announce that this programme of support will expire in ten years time,  allowing time for the people to force their government into funding it instead.

Oh dear! Two very obvious problems with this solution:

1. It won’t work. Aid dependency is far too entrenched. The donors would be blamed not the local political leaders. That might fit with Deaton’s philosophical argument, but isn’t much use in the real world.
2. Why 10 years? Why not add on another 10 and make it 20 years? I’ve got a few more exceptions I can think of … Where, in other words, do you draw the line when back on the slippery slope? You will always find someone with a well marshalled argument to draw the line that little bit lower.

Surprisingly Barder never explicitly tests Deaton on those two points, but he does tie him in a few knots with other thoughtful probing, before Deaton remembers that a big part of the ARVs success story was achieved by lobbying (especially by the Clinton Foundation and their army of bright, young things) in rich countries to get Big Pharma to reduce their prices, i.e. it satisfies his requirement about where aid money should be spent. That wouldn’t, however, entirely get him off the hook, as I suspect many of those reduced cost ARVs are still being paid for with donor money.

All of which is a bit of a shame, because apart from that Deaton makes a number of very good points, and much of his criticism of international aid is valid and insightful. But, as many academics are wont to do, by keeping his argument (in this case) strongly rooted in philosophical (some might say ideological) foundations, he fails to grapple with the messy politics and complexity of the real world. Also ironic, as, according to Owen Barder, Deaton is known for careful treatment of data.

* And British listeners can enjoy a nice little audio pun at the end!

When to cash out

Matt Collins is concerned that the current fad in international aid for direct cash transfers may squeeze out other important investments, especially in public goods which may not be financed otherwise. I quite agree. For a long time in aid the mantra was: “Don’t give a guy a fish, teach him to fish instead.” ‘Cash is best’ is almost the complete opposite of this. Both perspectives are valid; neither are universally satisfactory.

Two lines of thought that might help to bridge the gap:

1. Is there already a cash disbursement programme? If not consider setting one up as a first step (seeing as the evidence in their favour is so good) and then add on public goods / services later.
2. To what extent might cash payments be more beneficial when they are the exception rather than the rule? If households come to expect them will it not simply generate more aid-dependency?

Putting my cynic’s hat on for a moment (I do occasionally take it off!) I suggest that this fad will in time fade just like all the others, leaving behind a useful legacy of a different way of thinking. The question “Would the beneficiaries be better off with straight cash?” will always be a good one to ask.

Maintaining your investment

In my last two posts I queried how donors may fail to sustain otherwise successful projects that cannot make the grade to self-sustainability. Many others, of course, are handed over to the host country government, who proceed to run them into the ground.

These, however, are not the only things that the government (local and national) here fails to invest in. Basic infrastructure is repeatedly failing without any adequate back-up or emergency planning. Every time it appears to take the authorities by surprise. E.g. despite chronic power failures the water supplier’s stand-by generator has not been maintained and so power shortages automatically equal water shortages. Fine for a few hours, crippling for a couple of weeks!

Interestingly, there is one counter-example. After what I imagine is years of pushing by donors tired of funding new roads only for them swiftly to fall into various states of disrepair, the government is actually now quite good at repairing pot holes and the like. But alas this proactive approach does not yet appear to have spread to other parts of government.

It is temptingly easy to blame the government for all these failures, and slam them we do, but the problem is wider than that, as anyone who has rented property around here can attest. Landlords tend to build a house and then sweat their asset for all its worth, typically refusing to carry out any repairs.

This does not have to be totally irrational if one thinks of a boot-strap situation: a landlord may build a house and rent it to cover the costs of sending their children to university. Here the expectation of long term returns from education may far exceed that from property, and thus it may be appropriate to thus sweat ones asset. But I see many examples where clearly the landlord is not that poor.

Lack of credit and a poorly functioning financial system at large almost certainly do not help either, but I find it hard not to conclude that there is a culture of not maintaining one’s investment. How common this is in other developing countries I do not know (if you do please weigh in with a comment), but I can see it being a significant drag on economic development. Especially while the government cannot manage to keep the lights on!

(The big donors, too, could offer rather better examples than they do.)

The inverse of the sunk cost fallacy

This post is an extension of my thinking from yesterday’s post on how donors and BINGOs may sometimes prematurely pull the plug on an otherwise successful project which stubbornly refuses to graduate to full independence / self-sufficiency.

In the standard version of the sunk cost fallacy a donor who has already started a project that needs more money will be biased towards adding further funds, even if the project is turning out to be a bit of a dud. To an outsider they are chucking good money after bad, but to the insider they feel already invested in this project and reluctant to accept the loss on it (loss aversion). To an economist this is irrational behaviour.

However, in the longer term, this fallacy appears vulnerable to inversion in aid projects. When there is an a priori expectation that a project should become self-sufficient after a certain period of time there is an understandable frustration on the part of the donor if the final step always seems just too hard to take. It is true that a bit of tough love might be just what the project management needs, but that has to be a very careful judgement. If a donor has spent several million dollars setting up a project which now only costs $50,000 a year to keep going then I think they are guilty of equally irrational behaviour in pulling the plug (assuming the project is otherwise successful!), and yet I’ve heard exactly such discussions take place.

So much for economic rationality!

Small may be beautiful but is easily overlooked

CGD’s Connie Veillette and John Norris have some proposals for rationalising (and trimming) US AID’s budget. Included in some eminently sensible suggestions was the vignette that Belize apparently receives ~$20k each year from US AID, and, in Norris and Veillete’s opinion, this probably does not justify the overheads involved in managing it, and so it would make sense to cut it to focus on bigger things.*

If I were a senior manager at US AID I expect I would be pretty convinced by this argument for rationalisation. Except that I know I’ve also heard from time to time talk amongst BINGO staff to the effect that while a certain project may be one of their smallest / cheapest but it may also be one of their best. Such small projects often have very limited ambitions but may fulfil them exceedingly well. Not trying to be something more than you are can be a real virtue in such circumstances. Thus my message to US AID is that that $20k you send each year to Belize may just be some of the best $20k you spend each year, so if you’re thinking about cutting it in the name of rationalization please ensure there is someone else to take on funding the project before you pull out.

This brings me on to a related point about project sustainability. Some projects nearly but never quite succeed in graduating from donor / BINGO support. This can be frustrating for the donor / BINGO who want to move on, and always intended their project should reach self sufficiency. Indeed this may have been central to the original concept. If the project has not succeeded in its wider aims then it should certainly be canned, but I have also heard the odd suggestion from donor / BINGO staff that patience is running out with more successful projects. I find this attitude rather myopic. Given the failure rate amongst conservation and development projects it seems to me crazy to junk a project just because it still needs a few thousand dollars a year in support and technical advice.

So this is a plea to all those aid planners out there in search of the big win: please do not forget the various little ways you may have already discovered to make a small difference. They may not add up to the end of poverty as we know it, but they all count, and are probably a helluva lot more cost effective than those big daring programmes that too often fail for trying to be just too ambitious.

* I am amazed the US doesn’t fund Belize more, but it doesn’t matter to my argument if this particular detail is wrong.

Trust (part 2)

Yesterday I blogged about how the critical elements of a healthy trust relationship are too often missing in community development and conservation projects. Today, I turn my attention to the donor-implementer relationship, where trust seems to be even more lacking.

It is axiomatic of human nature that when given a job to do, whether just by our boss or a contract we have won, that, as far as possible, we just want to be left alone to get on with the job. Of course, if we have not completed the task to a satisfactory standard within a reasonable period of time we expect our boss to come asking awkward questions. But equally, we really resent a boss who checks up on us too much or asks lots of detailed questions about process rather than simply assessing the actual final product. This is just a fact of basic human nature and the need for both self-respect and the respect of others.

Some donors really do seem to get this, focus on the big picture, and we love them for it. But others unfortunately cannot resist the urge to quibble about minor details and to obsess about issues such as corruption or gender-mainstreaming in projects that have little otherwise to do with such things. Unfortunately, the message that sends out to us as a project implementer is: they don’t trust us. And nobody likes to work for a boss who doesn’t trust them, so you can expect us to carp about it … a lot! E.g. accusing one’s donor of neo-colonialism.

This issue can be bad enough between donors and NGOs, but I get the impression it gets even worse between bi- and multi-lateral donors and recipient country governments. After years of failed delivery, of course, the donor officials hardly trust the government officials, but each are locked into a system in which the donors are compelled to keep on giving, and the officials are compelled to keep on receiving. Worse, both sets of officials are accountable to their bosses for the successful continuation of the grant giving, and so are doomed to fight the same running battles about use or misuse of funds over and over again.

It seems to me that if donors want their donations to succeed, then we need to restore proper dignity and trust to this relationship, and not just with a few inane platitudes from ambassador to minister. In order to do this we need to simultaneously put aside all our historical bad feelings, while at the same time ensuring we have learned the necessary lessons so we do not just fall into the same trap all over again. This is what Cash on Delivery aid promises to do.

Some NGOs which are both (a) darned competent and (b) lucky to be working on a zeitgeist issue, can get popular enough with the donors that they can start to push back, and dictate terms to some extent as to how they are supported. Maybe even some more effective governments (Ethiopia? Rwanda?) have some success in this respect to? But most of us are stuck with benefactors who, despite all their protestations of being mere partners in the development process, clearly do not trust us very much. That can be hard to stomach.

Tomorrow, I will consider the even more poisonous non-trust relationship between civil society and government in developing countries.

It’s Our Money

How much should donors get to have a say in how their money is spent?

African activists fighting for the rights of homosexuals have issued a strong statement opposing David Cameron’s threat to cut aids to countries that mistreat homosexuals that I blogged about yesterday. A common theme that cuts through both the initial Ugandan journalists’ response that triggered my post, my own thoughts, and the activists’ statement is the question of what say do donors have in such matters. I want to talk about some generalities first, and then get back to specifics on this issue.

Firstly, international aid is a voluntary act by donors. Depending upon your point of view, it may or may not be entirely altruistic, but it is not an obligation under international law or any such like. (Conceivably this could change under a climate change agreement, with rich countries compensating poor countries for all the CO₂ they’ve already omitted, but expect the rich countries to fight this one tooth and nail.)

This voluntary nature means that the donors really do get to decide how and where they want to spend it. That is how the world works. Sensible donors will give due attention to how they can be of most assistance, and try to structure their aid accordingly. Those donors that do not may be stupid and/or complete hypocrites, e.g. Bush’s restrictions on PEPFAR money usage, but it is their mistake to make.

Advocates of good aid (including me!) understandably get frustrated when they see donors trying to get too demanding about exactly how their money should be spent, especially if it is spent badly. However, one thing that I’ve picked up repeatedly from non aid cogniscenti, is that developing countries (and their advocates in donor countries) ought to show a little bit of gratitude from time to time for receiving some of the donor country’s taxpayers’ money. We too can easily slip into a position where it sounds like we have presumed that developing countries are entitled to aid (as opposed to simply deserving), and, by implication that we, their advocates, are entitled to help spend some of that money. (I suspect I have been guilty of such multiple times on this blog.)

Thus, even if they are counterproductive, some donor conditions are to be expected. For bilateral government donors these are likely to be substantially determined by the views of their own electorate. They are often intolerant of corruption, and so anti-corruption measures are often a strong part of aid conditionality (for all the good that they do). Human rights are another classic example of the intrusion of developed country politics into the international aid business.

And if you do not like the conditions then just turn down the money! In cases of bad aid conditionality it is often not only the donors who are at fault, but supine recipient country governments who have become substantially dependent upon aid. (Even where it makes up only a small proportion of the budget, aid often pays for a big proportion of training workshops, junkets and other in-kind benefits off which local civil servants feed voraciously.)

Back on to David Cameron’s threat:

• The BBC news piece says that this came out of a review of the “future relevance of the Commonwealth”, which suggests that at least some level of consultation went into this.
• The threat certainly reflects the views of a large chunk of the British electorate. Ignoring this issue may have ultimately generated an even bigger backlash against all aid.
• Donor clarity on the nature of conditions attached to aid is a good thing. (See here and here for my previous musings on this.) Viewed from this light, Cameron’s threat could be criticised for still giving too much wriggle room.

On the debit side:

• At least some activists clearly do not want this threat, and consider it counter-productive. They make some pretty compelling points. If I were Cameron I would give a lot of weight to this consideration.
• Forces a culture clash when maybe one could have been avoided: on average as countries get richer homophobia seems to wane.
• Homosexual people may suffer more from having aid withdrawn than from abuse by their government.

These are some serious potential downsides that I had not considered fully before I read the activists’ response. But if you ask me would I like my tax money to go to a government that locks up people just for being gay I would say no. No matter how you might try to qualify the original question by adding riders about pragmatic solutions and appropriate cultural relativism, it’s hard to avoid the simple moral clarity of the original question.

This leads me to a clarification. I don’t claim to know the finer points of the UK government position, but I do not believe this should be about foisting our views on other people. I do not believe we should be asking people in developing countries to like gays just because we’re giving them some aid money. Neither do I think we should be asking such countries to pass equal rights regulation similar to what we have in the UK; without broad civil-society support this would be empty legislation, unenforced and probably unenforceable. But I do not think it is unreasonable – unwise maybe, but not unreasonable – to ask such countries not to actively persecute homosexuals.

Thus, I return to my original stance, with a slight adjustment. All in all I think this is probably a fight that was best not picked. Now that it has been picked, however, I find it hard to disagree with. That said, if I were Cameron, I would make strenuous efforts to take on board the views of local activists (maybe some support the threat?), and at the minimum seek to ensure this threat did not set back their own position and efforts any further. Maybe, for once, a bit of diplomatic obfuscation around the exact nature of the conditionality might not be such a bad thing.